Nothing in your original post provides any reason you would want to work in Indiana. Nor would any firms in Indiana take you seriously just because you went to IU. Also, IU has very little pull in Chicago, and almost none for people with no ties.

I had a similar choice two years ago (narrowed it down to IU or GW). I was living in Northern Virginia, just outside of D.C., with intentions on practicing in D.C. or Northern Virginia. I choose IU primarily for financial reasons, but in retrospect it would have been the right choice irrespective of the cost difference. I cannot make the choice for you, but I can give you some additional detail that may help.

IU has a strong focus in IP. I am focused on civil rights and haven't taken any IP courses, but the school really puts resources into the IP program. If you want to talk to some folks about IP here, PM me and I can put you in touch with some recent alum.

We have a stronger connection to D.C. than would be intuitive based on our location. D.C. is our third most popular destination for graduates, behind Indiana and Illinois. I was in D.C. my 1L summer at the Department of Justice, and I know there were many others in D.C. at the same time (including others at DOJ). The school offers a "Semester in D.C." program for those who want to do a full-time internship in the district other than just during the summer. And, since I enrolled, the Career Services Office was expanded to add an attorney who had been working in a D.C. firm and who helps those of us interested in returning to the area upon graduation. I ended up accepting a 2L summer position in a state to which I had no previous ties simply because it is with an organization that I greatly admire, but I had two other amazing offers in hand to come back to D.C. for my 2L summer. Internship offers are not the same thing as permanent job offers, but I think my success in getting offers from D.C. organizations was directly tied to the support that I got from the school (both career services and faculty with D.C. ties). The school also organizes trips to D.C. as a strategy for continuing to make use of the alumni base there and to grow it. I don't want to sell you, and I don't want to overstate anything, but since I was also worried about being able to successfully get a good job in D.C., it may help to know I feel that the school is supportive and has a solid grounding in D.C.

The major geographic downside that internships during the semester aren't in the place you want to end up. A part-time internship during the academic year can be really helpful for getting to know people in your local market -- and giving them a chance to get to know you -- and working remotely just isn't the same thing as being on site. I didn't fully take that into account when comparing IU with GW. But in that comparison, the employers who I could realistically intern for while commuting from near campus would actually be in the district. For you, there could be some ties with Virginia employers who have multiple offices, including an office in Lexington, but you're not going to be commuting to Northern Virginia or the district much. Even Philly is closer to D.C. than is W&L. So I do think you lose a little on a surface-level demonstration of having roots, but I cannot see what is lost in terms of the actual concrete benefits of those roots. Maybe someone with ties to Lexington can tell me why I am mistaken, but I think Northern Virginia and Central/Southern Virginia are sufficiently far apart that the geographic benefits aren't that pronounced.

I think I've come across as a little more trying to sell IU than I actually meant. It just happens that your interests overlap with areas that IU is stronger at than the surface info would suggest (namely, IP as a topical area and D.C. as a geographic area). I have no idea about the interaction of those two strengths though. For example, some of the IP strength is tied to pharma companies (which are huge here), and it could be that the D.C. ties are in other topical areas. So even though I cannot speak to the combination of IP and D.C., I know we "punch above our weight class" on those two things when evaluated separately. If you want to chat, PM me and I'll give you my phone number or I can give you contact info for alum doing IP work.

I cannot speak specifically to what OP's option would be for IP from IU in DC, but just wanted to respond to the following:

abc987 wrote:We have a stronger connection to D.C. than would be intuitive based on our location. D.C. is our third most popular destination for graduates, behind Indiana and Illinois.

I think this may be a bit misleading to OP. This is not uncommon to a significant amount of law schools (DC was also my school's third most popular destination, which is also a state flagship). The problem is getting a decent paying job doing legal work in DC. Most jobs in DC are big law or gov't/policy/politically based. The Gov't and big law positions are super competitive, even for those with top grades within the T14. A lot of the policy and political jobs pay awful and you do not really need a law degree for those. The DOJ isn't hiring some kid from a random state flagship for a full-time long-term legal job unless it is by some absolute miracle.

tldr; having a bunch of graduates go to D.C. does not mean they are getting good-paying jobs as lawyers. I am not endorsing W&L at that price by any means, but Indiana definitely does not make sense for VA/DC.